The one thing that is missing in the whole sustainability area and renewable energy policy is a sound focus on the economics and the finance of green energy. With new buildings this is not a problem, but the greater market is retrofits in older buildings and in that arena by and large people are wasting their money with tinkering in the margin instead of making the most of the opportunity.
If it takes 10 years for a new efficiency standard to work its way through the car fleet, then the picture is much worse with buildings, because they typically last a bit longer than cars. Living in one of the older parts of NYC, I'm surrounded by 50+ year old structures, which still have plenty of life left in them.
Policy Failure #1:
Conflating Energy Efficiency and Renewable Energy
Conflating energy efficiency and renewable energy is an obfuscation which serves only the fossil fuel industry, which is why they eagerly embrace "energy efficiency." This is how they compete against renewable alternatives. Energy efficiency is a marketing strategy and a greenwash of the fossil fuel industry, and it is financially disruptive. In various posts on this website, I have demonstrated how this manifests itself across many programs, and acts as a way to divert investment from green technology, even if it would be financially more advantageous to property owners.
Since this approach benefits the fossil fuel industry, this is a typical policy failure, which achieves the opposite of what is intended, and change is in order.
Policy Failure #2:
Arguing over Clean Fuels is like rearranging the deck chairs on the Titanic
As argued in earlier posts, the whole NYC Clean Heat program is a massive example of policy failure in this area. The whole point is we are in a transition away from fossil fuels, and towards renewable energy, and now that we generally realize how much energy is consumed by buildings, and green energy technologies that are suited for mounting on buildings are proliferating, it is time for policy makers to encourage this development, instead of putting road blocks in the way. Even with all of the best intentions, this is how most programs have worked out so far.
Policy Failure #3:
Not seeing the forest for the trees - misguided incentives
Tremendous amounts of time, effort and money are wasted over what technologies are blessed with the Investment Tax Credit, which is good for sales for the companies that make them. However this puts the focus on individual technologies, and not on the whole project, which can only be judged on the property as a whole. If accountants start specifying the wrong components because of ITC, inferior projects will be developed, never mind how good the individual components are. There is a right place for everything. But having accountants make engineering decisions is counter-productive.
Policy Failure #4:
Disregard for long-term financial planning is encouraged by incentive programs
By various forms of incentives on equipment, such as the ITC, or a requirement to specify Energy Star equipment, regardless if it is the best for the job from an engineering standpoint, suboptimal projects are being developed. What matters is to reduce the Green House Gas emissions on a building level, so the incentives should address the achievements of the building as a whole. Energy Star is fine for a fridge or a micro wave, which are one-off decisions, but specifying the credits on construction components causes accountants to mess up the best engineering. More importantly the whole industry has gotten in the bad habit of evaluating financial decisions at the component level, based on payoff of that component in terms of savings, which gets in the way of long-term capital plans, which would reveal very different design strategies.
Policy Failure #5:
Absence of simple objectives, such as reducing Green House Gas emissions
Once the policy focuses on the right issues, namely reducing Green House Gas emissions building by building, better designs will proliferate, and long-term capital budgeting becomes the obvious way to design capital plans. Thirty year cash flow models should be the norm, and ideally should be required by financiers and e.g. PACE bonds. The whole point of PACE bonds was to have a way to raise the upfront capital needed for this transition, which would add to long-term asset values. Instead, a lot of PACE money is being wasted on dubious "energy efficiency" projects, and property owners are frittering away the long-term appreciation of their buildings by investing in renewable infrastructure, and moving energy from the liabilities to assets.
Conclusion:
How to Achieve Sustainability in Spite of Policy Failure
In spite of all policy failures, building owners have a vested interest in sustainability, because it increase asset values, and they should be using 30 year capital budgets for energy retrofits with green energy technology; in other words the various programs and incentives should be ignored and the long-term economics of the building should get priority, before you figure out how to qualify for the incentives.
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